The table below includes both Short Term (S - T) and Intermediate Term (I - T) Rating results of our technical analysis of the price direction for the Styles and Sectors we follow. The intention is to give you insight into the time frames that are involved in our portfolio management process. Short Term ratings capture more of the wiggles in the market while the Intermediate Term ratings capture more of the trending aspects of the market. If we are in a period where the market is in a trading range with little trend direction, the Short Term ratings are more useful. On the other hand, if the market is in a longer term trending mode, we put more emphasis on the Intermediate Term Rating results. Note that signals can change in between reporting periods which may be confusing at times. For example, a Green light may have changed to Red and back to Green since the last report. The Rating Table would still be Green but the signal date would have changed from that shown on the previous report.
PORTFOLIO ACTIONS FOR THE MARKET WEEK ENDING 1/4/08
Natural Resource Plus - NRP: Natural Resource sectors have remained in bullish trends. We have increased our allocation somewhat since the last report. The current allocations are 7% Gold bullion, 35% Precious Metals Mining (including a 5% direct silver mining position), 5% Energy Services, 10% Energy Exploration and Production and 20% Natural Resources. Net market exposure is currently 77% with Money Market Reserves at about 23%.
Gold Portfolio - GLD: Gold bullion closed Friday above the early 1980 high for a breakout of the nearly 28 year consolidation that pushed the gold bullion price down to the $250 level in 1999. This could be the beginning of a major move up in gold bullion from a technical viewpoint. Of course, central banks action, monetary policy, economic trends, etc. will be factors affecting the trend in gold. It will be an interesting action over the next few years in my opinion. Typically, breakouts are often followed by a retest, so some consolidation is likely over the near term. However, if gold can hold above the consolidation pendent formation formed from early November to mid December, the recent bullish trend should continue, in my judgment.
Interestingly, the head-and-shoulders topping pattern that had a left shoulder in mid October, the head in early November and the right shoulder break down mid December, found good support at the 200 dma and rallied back up through the breakdown level. This type of price action, that quickly reverses a pattern breakdown, is normally very bullish and we see that the Precious Metals sector has rallied sharply over the last couple of weeks. We also now have double Green lights for the Gold mining sector. The current allocation is a 15% gold bullion position, a 5% silver bullion position and 60% precious metals mining securities, which includes a 10% specific silver mining allocation. Money Market reserves are 20%.
Tactical Asset Allocation Style & Sector Signals:
Ratings 60% and Above are a Green Light
Ratings 40% and Below are a Red Light
Ratings 41% to 59% are Neutral
Light Green indicates going from Green to Neutral since last Signal Date
Pink indicates going from Red to Neutral since last Signal Date
This is a reduced version of Ron Miller's Tactical Asset Allocation Style & Sector Signals table. Ron's portfolio management process includes the technical analysis of over 400 mutual funds that have been selected to represent forty four different styles and sectors that are tracked daily for both Short Term and Intermediate Term direction signals. These include the 9 Morningstar portfolio management style boxes plus 16 equity sectors, 10 international styles/sectors and 9 bond sectors. Ratings are based on the percentage of securities followed in each category that are on buy signals. Short Term (S - T) signals are based on daily price data and may be different and change more frequently than the Intermediate Term (I - T) signals that are based on price action for a trailing 5 day period. These ratings are subject to change at any time and obviously their accuracy is not guaranteed. Individual securities may perform differently from these signals. These direction signals are a useful tool in the portfolio management process but are not the sole determinate of actual portfolio style or sector weightings. They should not be interpreted as a buy or sell recommendation for any specific financial securities and do not reflect positions of Morgan Keegan. Market data used in this analysis is believed to be from reliable sources but its accuracy can not be guaranteed. Past performance is not indicative of future results.
Portfolio Action Update Explanation: I try to confine my comments to a discussion of what recent action has occurred in these portfolios and my current technical analysis posture. In general, my portfolio management approach is to determine current market conditions through technical analysis and to position the various portfolios strategies to participate in the current environment. Although I usually have an opinion of the future direction of the market, I donít rely heavily on my opinion in the portfolio management process. Neither opinions, technical analysis or fundamental security analysis produce perfect results. There is always a degree of risk present.
These comments will usually be written on the Weekend. However, a few days may transpire from when they are written and when they are posted on the web site. Obviously, the technical analysis signals and portfolio positions could have changed in that timeframe. Therefore, this technical information and related comments should only be read from a historical perspective, and may not reflect what the current analysis and portfolio positions actually are when you read this update. You can call us for the most current update if you wish.
Although the Technical Analysis Ratings illustrated in the table above are a very useful tool in our portfolio management process, these ratings are not the sole determinate of the asset allocation positions held in our various portfolio management strategies. This information is not intended to be a solicitation of a buy or sell of any financial security. The opinions expressed herein are my own and do not reflect the position of Morgan Keegan & Co., Inc. Past performance is not a guarantee of future results.